Cheap gas, regulatory uncertainties, and a technology revolution are re-making the U.S. utility industry. Top executives at three very different companies—CMS, NRG, and the Midwest ISO—share their...
East Vs. West: Growing the Grid
The models and motives behind tomorrow’s transmission expansion.
meanwhile (including AEP), would receive net credits totaling $158 million per year. 7
Clearly, AEP’s credit position under a highway-biway rate design would improve even more with construction of the new, high-voltage, 765-kV Interstate Project. Would PJM accept such a scenario? Interestingly enough, PJM executives had foreseen much of this debate long before AEP came forward with its RTF rate proposal.
Last summer, at a conference held in West Virginia to explore transmission investment options to facilitate greater reliance on coal-fired power, PJM’s Western region president Karl Pfirrmann had presented a remarkable talk on “Project Mountaineer”—PJM’s ultimate pipe dream of a transmission project.
Pfirrmann advised his audience not to think of Mountaineer as an actual project, but instead, as an overview of what PJM would want to commission and build if all its wishes could come true. But Pfirrmann’s description of how the Mountaineer might appear now looks quite a bit like AEP’s Interstate Project. Thus, he staked out Mountaineer as a hypothetical network of new 500-kV and 765-kV transmission paths stretching 550 to 900 miles—linking Kentucky and West Virginia to Eastern load centers stretching from Washington, D.C. to Northern New Jersey—costing between $3.3 billion and $3.9 billion, and capable of carrying 5,000 MW of power. Pfirrmann offered maps, as well; look them over and you see a virtual blueprint for AEP’s Interstate Project, proposed seven months later. 8
Even more remarkable, however, was Pfirrmann’s comment on how to deal with the cost:
“Although this [Mountaineer] is clearly a costly undertaking, it is worth noting that … $4 billion in new transmission investment [translates] to only 1 mill/kWh on a typical residential bill if such costs were spread across the entire PJM footprint.”
AEP could not have said it better.
Resource Development: The Western Model
One year ago, on April 4, 2005, California Gov. Arnold Schwarzenegger joined with fellow governors Kenny Guinn (of Nevada), Dave Freudenthal (of Wyoming), and John Huntsman (of Utah) to announce a four-state effort to build a new high-voltage electric transmission line across the Western United States, originating in Wyoming, and with terminal connections in each of the other states. This project, to be known as the Frontier Line, would cost between $1 billion and $1.7 billion. According to a memorandum of understanding released by the four governors, Frontier would allow for development in the Intermountain West of up to 6,000 MW of wind generation, plus 6,000 MW of clean coal power, to serve major load centers such as Salt Lake City, Reno, Las Vegas, and Southern and Northern California. The idea was developed by a number of stakeholders and technical experts working as part of the Rocky Mountain Area Transmission Study (RMATS). RMATS, in turn, operates as part of the Western Transmission Protocol, a brainchild of the Western Governors’ Association. Frontier’s acknowledged lead sponsor, however, is the Wyoming Infrastructure Authority, a state agency created in June 2004 by the Wyoming legislature for the express purpose of getting new transmission built. 9
Six months after the Frontier announcement came word of more projects of similar heft and purpose: